When a person dies and his or her estate passes through probate, numerous steps must be taken to settle the estate. In probate proceedings, an executor plays a critical role in achieving this so that the testator’s intentions are followed. One of the duties of the executor is to pay the debts of the estate.
Debts do not disappear when a person dies. Instead, debt becomes a liability of his or her estate. While debts must be settled, an executor mustn’t pay more than the testator’s estate owes, which can unnecessarily and irresponsibly deplete the estate. For this reason, an executor will need to carefully search the testator’s records and obtain credit reports to identify creditors.
Debts are Paid by Priority
With an understanding of the estate’s debts, the executor is responsible for notifying creditors of the testator’s death and that probate proceedings are underway. First, the executor is responsible for immediately settling the end of life and funeral expenses, which must be paid as soon as the funds are available to the executor.
Once the end of life and funeral expenses are settled, debts are paid off by the priority class of the creditors. This means secured creditors first then unsecured creditors. Secured creditors are creditors that have collateral attached to the debt the decedent owes. Common examples are mortgages in which the bank can foreclose on the property if the debtor defaults. Unsecured debts do not have collateral attached, such as credit cards.
A testator may designate property that must be used to settle debts. If that property is insufficient, then the executor is responsible for using other property to pay the debt per the testator’s intent. Once debts have been settled and fees have been paid to the court’s satisfaction, the court can authorize the executor to proceed with filing the estate tax return and distributing the remaining property per the testator’s will.
Estate Planning Attorneys, Viloria, Oliphant, Oster & Aman L.L.P.
Viloria, Oliphant, Oster & Aman, L.L.P. is a small law firm that provides unparalleled service to people who want help with estate planning or probate proceedings. Our attorneys are intelligent, respected professionals who will use our experience to your benefit. We want you to have all the information you need to make well-informed decisions. Call Viloria, Oliphant, Oster & Aman L.L.P. today at (775) 227-2280 to schedule a consultation or contact our office through our website.